Correlation Between Erste Group and American States

Can any of the company-specific risk be diversified away by investing in both Erste Group and American States at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Erste Group and American States into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Erste Group Bank and American States Water, you can compare the effects of market volatilities on Erste Group and American States and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Erste Group with a short position of American States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and American States.

Diversification Opportunities for Erste Group and American States

-0.21

Correlation Coefficient

Erste Group  American States

Very good diversification

The 3 months correlation between Erste and American is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water and Erste Group is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Erste Group Bank are associated (or correlated) with American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of Erste Group i.e., Erste Group and American States go up and down completely randomly.

Pair Corralation between Erste Group and American States

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.24 times more return on investment than American States. However, Erste Group is 1.24 times more volatile than American States Water. It trades about 0.1 of its potential returns per unit of risk. American States Water is currently generating about -0.1 per unit of risk. If you would invest  5,948  in Erste Group Bank on December 23, 2024 and sell it today you would earn a total of  796.00  from holding Erste Group Bank or generate 13.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Erste Group Bank  vs.  American States Water

Erste Group Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Erste Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

American States Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days American States Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Erste Group and American States

The main advantage of trading using opposite Erste Group and American States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, American States can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American States will offset losses from the drop in American States' long position.

The idea behind Erste Group Bank and American States Water pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.